The Importance of Planning and How to Avoid Common Mistakes

oh eight four four two five six three seven. I'm gonna be talking this week about some common mistakes folks need to avoid when it comes to retirement planning. Door for get. Also, if you have questions, whether it's about today's topic or retirement planning in general, we've got phone lines open for you at six oh eight three two one thirteen ten. That's six oh eight three two one thirteen ten. We'll get you right on the air with Malia and Kyle this morning. A couple great things I

mentioned the website colass financial dot com. Not only is it a great place to learn more about Class Financial, you can also sign up and subscribe to the weekly Market Pulse newsletter. It's a great weekly email that arrives in your inbox with some great snapshots of what's been going on in the markets, as well as the link to the most recent podcasts that available to you at klossfinancial dot com as mentioned. Joined this morning by Malia

Quavis and Kyle Kite. Melia, how are you doing this morning?

from our friends at Coloss Financial. And before we get rolling on this week's program, let's actually take a look back at last week's class quiz question week Malia and get the question and answer there as well.

to him. He called in and answered correctly true. Wait, once you reach the FRA you can receive one hundred percent of your Social Security benefit, so congratulations to him. Listen carefully for today's question.

the cost quiz question the league come up during the program. Again, we'll tell you all the details on how you can win that twenty five dollars gift card to Amazon a little bit later on in this half hour. So as we think about and of course this week, we're going to be talking about some of the mistakes people need to avoid with the retirement planning. And Kyle, what are some of those that we should be aware of when it comes to our own planning.

back from if you're too aggressive right before retirement. So the famous one that I remember is from two thousand and eight, we had a client come in and they were almost in tears, and they had a really nice portfolio, and we asked them, you know, what was the issue, and he said, well, before last year, I had double this amount. So they stayed too aggressive too late in their portfolio. Basically had cut in half because of one

bad year in the market. And so that is very, very hard to recover from because obviously if you lose fifty percent, it takes one hundred percent to get back up to where you were. Obviously, one hundred percent return to get that back. So it's very, very easily avoidable, which is why we kind of harp on it a little bit that the last thing you want to do is you get close to retirement is just have too much left in the stock market and have something go

against you. It can be almost basically hard to come back from so and so many people try to time the market to get in and get out at the right time and trying to make up for lost years if they didn't start investing early enough, and this is just not a good idea like that, Managing that risk is the most important part as we get close to retirement. Tier The second mistake and the one that people are very very familiar with, is retiring without fully considering health

insurance costs. So many people, as you know, will say that I'm working just for the insurance. If you've got friends or family members to say that, and it's because it is one of the biggest concerns for a lot of people. But there are some options out there. So many people would be eligible for Cobra continuation health coverage, which allows you to remain on your employer's planes for

a certain amount of time. Generally, it's about eighteen months, but you may be required to pay up to one hundred and two percent of the planing cause, so what you see taken out on your check each week, or each every two weeks, whatever it is, you may have to double that because you'll have to cover for what

the employer is currently paying. And generally, COBRA applies to all group health plans maintained by private sector employees with twenty or more employees, So again, this is one that many people will be eligible for, but it doesn't mean that it's cheap or it's going to be your best option or anything like that, so you should definitely speak

with your employer for details. Another option when it comes to health insurance is if your spouse is going to continue working and if you can continue to be covered under their coverage. That obviously solves for this as well, because generally, when you're working carrying insurance through an employer, it's obviously going to be a lot less expensive than if you were to pay for it on your own.

And then some people will have the Veterans Health Insurance or VA benefits, so if you're a veteran, you may be eligible to enroll to the or go to the VA for healthcare. And finally, the one that gets a lot of buzz is the Affordable Care Act. So if you're retiring more than one year before you turn sixty five, you may be looking at justing a major medical insurance to the Affordable Care Act. And so this one, they

actually have a website healthcare dot gov. You can actually go through and look at different options for health insurance costs and also plans that are available in your area, check networks, that kind of stuff. And this is really tied to your income. So if you're have a lower income, you may be entitled to some pretty good subsidies from the government to keep this health insurance and cost pence

the name the Affordable Care Act. So, like I said, insurance is one of the big ones that people are concerned with, and with good reason, but there are some options out there for most people. Talk and the third mistake is cool.

pay off the mortgage to retire. And by doing that, if you do that with all pre tax money, that could crush you as far as taxability. So if you pull out one hundred and fifty thousand dollars from your four oh one K to knock out your mortgage, that whole one hundred and fifty thousand could be income taxable to you. They want to be very, very careful and that might not be the best option for you.

Not only to listen back to the podcast, you can even subscribe to the podcast online learn more about the Class Financial team again. That all at classfinancial dot com. They're tough for number six oh eight four four two five six three seven. No charge for the initial get to know your appointment tech Loss Financial. It will be complimentary to you again the number six oh eight four

four two five six three seven. So, Malia, let's talk about choices when it comes to taking a pension if you have one of those, are there mistakes folks can make with that decision?

irrevocable decision. Once you mark the little box, it kind of stays like that for the rest of your life. So it is a very important thing to look at with your financial planner before you just mark the box and send it in. And we have unfortunately had situations where that did happen and it wasn't the best option for the client. So you want to slow down, look

at the options. Make sure you understand the difference between if I were able to take it out as a lump sum, a lump sum would mean it's all available to you right now. You typically would go ahead versus annuitizing it as a pension. You could actually take it out, roll it into your own IRA, and then you could create your own systemized distributions which are kind of like anneutized,

but it could be shifted however you wanted to. However, if you take the traditional pension, which we talk about single joint or other choices, single or joint and there's several others that will be determined. You know what works in your situation. Do you need more income now? Does your spouse have a pension perhaps that's been turned on, and looking at those those amounts per month, what that

will do for you. Perhaps the pension is worth more to you for the future if you know you have longevity, and that might be the best choice for you along the way. So just slow down, make sure you know what you're signing up for, because this is not going to be your only income source. Likely you're going to have Social Security. Likely you'll have a nest egg to

draw off of as well. So we want our clients to have the most flexibility when it comes to retirement income, and of course we want them to have some type of reassurance that they will have monthly income coming in regardless of what the market may or may not do.

to three percent. And so what we like to look at is every single year for our clients, when they can do this financially, we like them to try to max out those retirement plan contributions. So in twenty twenty four,

this is the bogie. If if you're under the age of fifty, that numbers twenty three thousand that you are permitted to put a way into this tax deferred plan through your employer, whether it be a four to one K or four h three B. And if you are over fifty, there's an additional seventy five hundred dollars ketchup that you can do for a total thirty thousand, five

hundred dollars per year combined. So you know, if you and your spouse spouse are both working, that's a lot of money you're able to not pay taxes on today, allowing for it to grow tax deferred. So we want to get get into that situation where you're maxing those contributions out. Now, I want to mention something, but I want to confuse people. I want to mention something exciting

that in twenty twenty five. So starting in January next year, there's going to be the opportunity for what's called a super ketchup, and a super ketchup will be for employees who are age sixty to sixty three, and instead of that extra additional seventy five hundred for employees who are sixty to sixty three, they'll be a ketchup of eleven thousand, two hundred and fifty dollars, which means that you in twenty twenty five can actually store away as much as

thirty four thousand, two fifty. So, as Kyle said, we don't want people to be too too risk oriented as they approach retirement. Flip side is we want you to take advantage of being able to defer as much because these are typically your higher earning years, so when the IRS permits things like this, we are all about taking advantage of. Let's get an in as much as we can to grow tech deferred for you.

five six three seven. We haven't mentioned social security. We'll get the details on that from Malia and Kyle. We will do that next as Money in Motion with Coss Financial continues right here on thirteen ten, WIBA talking with our retirement planning professionals from COSS Financial, Malia Quavis and Ben Cossfinancial dot com. That's Coss k l aas Financial dot com. Great website and resource to learn more about

Coss Financial. Also an opportunity there to sign up for the weekly Market Pulse newsletter that available to you at Cossfinancial dot Com. Telph number for the office right here in Madison six oh eight four four two five six three seven. No charge for that initial get to know your appointment Tech Loss Financial. It will be complementary to you again the number six oh eight four four two

five six three seven. Talking this week with Malia and Kyle about mistakes to avoid when it comes to planning for retirement and Malia, we haven't touched on social secure. I've got to guess that there is a mistake involving social security, isn't there?

But what we want you to take away today is you need to remember that the earliest you can draw us age sixty two and I'll be honest, most people know that because they're like, hey, I'm going to start. But full retirement age is probably age sixty six or sixty seven for the majority of our listeners. So the question is how soon do you take your benefit? And as I said, there's a difference between when you can first take it or when it actually will be your

full retirement age. Again fro according to Social Security, if you're born between nineteen forty three and nineteen fifty four, according to them, your full retirement age is sixty six. If you're born between fifty five and fifty nine, your full retirement age is sixty six plus some months. And then born after nineteen sixty we're looking at age sixty seven. So that is the full retirement age at which you can collect one hundred percent of your benefit. Now we've

talked later, we've talked before. Obviously, if you wait from full retirement age to age seventy you can accumulate an extra eight percent per year. So that's very enticing for people. But again, if we make that decision, I just want to start Social Security been paying into it for years. You know what's that going to look like? Well, you can go to SSA doc Gov and get a calculation

for that. But just know that age sixty two you're only going to receive about seventy four percent seventy four point two percent of your monthly benefit, so about a thirty percent reduction, and that's a permanent reduction. And age sixty five you're going to receive about ninety two point two percent of your full benefits. So you really want to carefully look at this. When does it when? When are you maximizing this? Even though we know your benefit's

going to grow the longer you wait. Though, the fact is Social Security data shows us that the average age most people begin benefits is around sixty five, and that's gradually increased from age sixty two over recent years. So what's important is that you figure out what works in your scenario, not your neighbors or your brothers or anything like that, what is going to make the best sense for your family's income as you enter retirement. So sit down with someone and map this out.

three seven. No charge for that initial get to know you appoyment at COSS Financial. It is indeed complementary to you again that number six oh eight four four two five six three seven. We'll take it down the home stretch whilst our Closs Quiz question the week with you. We'll do that next as Money in Motion with COSS Financial continues right here on thirteen ten WI b A Join this week by Kyle Kite and Malia Quavis. They are our retirement planning professionals from COSS Financial. The website

Class financial dot com. That's coss k l a a s Financial dot com. Great website to learn more about COSS Financial, the separate divisions at Class Financial, how they can help you or if you're an employer, and some of the other areas that they work in at Class Financial. Again, that all available at coss financial dot com. That's Coss k l a a S Financial dot Com telephone number for their office here in Madison six oh eight four four two five six three seven. That first appointment at

COSS Financial. It is complementary in the telephon number is six eight four four two five six three seven. Going hold on the teleph numbers. Welcoming up a little bit later in the segment, we'll do the Class Quiz question leak your chance to win a twenty five dollars gift

card from Amazon from our friends at Class Financial. And as we're talking this week about ten mistakes folks need to avoid with the retirement planning brings us to number seven and Kyle, what are some of these other mistakes folks should be avoiding?

obviously things come up. So while more than half of today's workers plan to continue working in retirements, the reality is that just one in five aged sixty five and over are actually employed. According to the US Department of Labor. Now this number has almost doubled. It used to be eleven percent forty years ago and we're up to, like I said, almost twenty percent now. So it has gotten better obviously with you know, medicine and people taking care

of themselves, longevity, that kind of stuff. This has obviously gone up. But this could be out of your control and you could be forced to stop working and retire early for a number of reasons, one of course being health related issues. So either you your own or those of a loved one are a major factor. So maybe you have to quit to take care of aging parents, or you know, you have some unforeseen circumstance that forces you to stop. And then there's also employer related issues,

so downsizing, layoffs, buyout. So this has become quite common here recently. Is you know, as people are you know, aging workforce, they tend to be higher paid employees, so those are kind of the ones that they may be able to to you know, buy out and kind of force an early retirement so that they can bring some younger people, lower paid, skilled into those positions. And then also failing to keep your skills up to date is

another reason older workers can struggle to get hired. So obviously, as fast as technology is moving things like that, some people kind of get come place and don't keep up with with what's changing, and then they're kind of all behind the time. So the actionable advice that we have for everyone to assume the worst and save early and often so only twenty eight percent of baby boomers survey by that Trans America study have a backup play and

to replace retirement income if unable to continue working. So again, the worst you can do is just kind of not have a plan and just get to these ages and something happens, even out of your control, when you're kind of stuck. So another one mistake number eight here is

putting your kids first before your retirement. So we see this one a lot, and it's obviously understandable because most people want their kids to have the best of everything, right, best education, the biggest wedding, all that kind of stuff, and if you can afford it, that's great, But footing the bill for some of these larger expenses like college or big wedding, that kind of stuff at the expense of your own retirement savings could come back to hurt you.

So we see this a lot of times where parents will, you know, sign up for the parent plus loans and things like that. And unfortunately, with those student loans and parent plus loans, it's not like you have an asset that you can sell and pay that note off right. That cash has to come from somewhere. A lot of times it comes out of four to one k's or you know, the nest segg that you've been putting away, that kind of stuff, and that can really really put

a damn front things. And remember that you can't borrow for your retirement living, so instead you should be exploring other avenues other than your four one K plan to help fund a child's education. So you should look at scholarships, grants, student loans of course, and even less expensive in state schools in lieu of liquidating or borrowing from that retirement account. So no one plans to run out of money in retirement,

but it can certainly happen for different reasons. So this is why being prudent now may prevent you from having to move into your kid's basement later. So I do have clients tell me that that I took care of my kids long enough in the take care of me now.

And it's really important. If you missed any part of today's program, I you missed any part of those mistakes, you can always listen back at Clossfinancial dot com. That's cost k l a A s Financial dot com. Artelf number six So eight four four, two, five, six three seven. I've got two left here, Kyle. What's mistake number nine?

lifestyle you're used to, that kind of stuff. So most of the time, what you'll read out there is an appropriate withdrawal rate out of a retirement account would be four to five percent, depending on your age and circumstances, and that should replace between seventy to one hundred percent

of your pre retirement income. So the reason that you'll hear that kind of replace eighty percent of your income in retirement number out there is because many people don't realize that what your salary is, you're not bringing that amount home, right, You're paying fight attack is on that, you're paying for health insurance, you're putting money into your

four oh one k, all that kind of stuff. So that's always say when you're looking at what you need to retire, really focus on your net take home pay, right what hits the bank account, because that's what people are truly living on. It's not this big salary or anything like that. It's what's coming in and going out each each month. Obviously, So the five percent bogie that we talk about is a good number for most people

just to get an idea, right. So if you think about everybody heard it was an old money magazine I think article back in the day that you know you need a million dollars to retire. Well, if you do the math on that, right, five percent of that's fifty thousand dollars plus in social security. You're probably in that eighty to ninety thousand and range for most people, which is obviously you're not going to be living on the

street or anything like that. It is fairly comfortable. But again, depending on what your goals are and things like that. That's why we want to be very, very careful with that withdrawal rate because as you know, when you are pulling out a higher percentage and you have a bad year in the market, that just can really really damage the portfolio and it may not ever recover from that.

So we got to be careful of that. And the final mistake, this is the one that Molly and I joke about all the time, is that yes we do a lot with numbers, but we're also you know, a shoulder and an advisor for people and wait outside of money, So do not wait till you're retired to develop hobbies or to get fit. So begin taking steps today. So as you're able to have a healthy transition to the next phase of your life mentally and physically. So we

say we don't want people retiring from something. You know, you just want to retire just because you don't like your job and you just want to get out of it. But you really don't have any hobbies or anything like that. You can only read so many books, play so much golf that kind of stuff. You've got to find some social hobbies to get out and do and things like

that as well. And we want you to retirement should be that time where you are able to you know, check that bucket list, trips off, do the stuff you've always wanted to do, pick up that new hobby, whatever.

initial gets to know you appoyment at costs Financial. It will be complementary to you again their number six oh eight four four two five six three seven. You want to hold on to that telephone number now because it's time for the Class Quiz Question the Week. It works like this. In just a moment, I'll ask you the class Quiz question the Week. You will then have thirty minutes from the interday's program to call the Class Financial office right here in Madison at six oh eight four

four two five six three seven. If you are the first call correct answer, win this week's prize, which is a twenty five dollars gift card to Amazon. This week's CLSs Quiz question the week is this. If you are over fifty years old in twenty twenty four, what is the maximum you can contribute into your employer retirement plan? Is it twenty five thousand or thirty thousand, five hundred dollars? Telephone number six oh eight four four to two five

six three seven. First call correct answer when that's twenty five dollars gift card to Amazon. Don't forget as well. That's COSS Financial's office right here in Madison, that number six o eight four four to two five six three seven. Malia Kyle, great talking with both of you this morning. Guys, have a fantastic.

offer tax or legal advice. Any opinion offered during the course of this show is the opinion of that particular investment an advisor representative, and not necessarily the opinion of class Financial News comes your way next right here on thirteen ten WIBA